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REO

So Much for a Sleepy Summer

Aug 31st, 2009
by Kathy Rain.
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by Rick Turley

Generally speaking the Bay Area real estate market has seen a bit of a bounce this summer with sales increasing in all categories—from the entry level homes and condos to the high-end market. 

National figures showed June with an 11% increase in home sales and the Bay Area seemed to share that trend with July sales up 15% over July 2008.  As the number of sold units continues an upward trend, price recovery is a bit of a mixed bag depending on the area. The entry level median price is increasing in all counties, due to very little supply against a healthy demand.  The just-under, just-over $1M mark seems to be holding its own, with a few multiple offers out there for the right property in a sought-after community. The higher end properties over $2M have, in the past 30 days, seen more activity than at any time this year, but price remains a critical factor as to which properties seeing this activity actually go into contract.  It seems the higher the price-point, the more critical it is for a very attractive list price.  Sellers who are selling are very realistic about marketing price, and Buyers who are buying are recognizing good value when they see it, and are taking action swiftly. For cash buyers or those with large down payments, this could be a great time to pick up a bargain in the luxury home market. 

This week the National Association of Realtors released its monthly existing home sales report (http://www.realtor.org/press_room/news_releases/2009/08/strong_uptrend?LID=RONav0021) noting “For the first time in five years, existing-home sales have increased for four months in a row, according to the National Association of Realtors®.”  The report went on to note, “Existing home sales – including single-family, townhomes, condominiums and co-ops – rose 7.2 percent to a seasonally adjusted rate of 5.24 million units in July from a level of 4.89 million in June, and are 5.0 percent above the 4.99 million-unit pace in July 2008.  The last time sales rose for four consecutive months was in June 2004, and the last time sales were higher than a year earlier was November 2005.” 

Lawrence Yun, NAR chief economist, said he was encouraged.  “The housing market has decisively turned for the better.  A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales,” he said. Ultimately these are all very positive signs for our market and are a strong sign that we are moving in the right direction towards a housing recovery.

A few other interesting articles of note for the week: 

Now let’s take a look at this week in real estate: 

  • East  Bay—Berkeley reports some buyers are still not prepared to compete in a multiple offer situation and may not believe this market until they’ve lost out on a few properties.  Castro Valley reports there is very limited inventory in our local market right now.  We had nine homes on Brokers tour during the course of this week, and Agents are hungry for homes to sell.  We had a few properties that hit the market this week and went pending in a matter of days.  Multiples, multiples, multiples.  There is an increase in the number of buyers calling our office looking for agents to help them buy.  We have gotten a lot more floor activity in the past week, despite the drop off in activity due to kids going back to school.  Danville reports all market activity is strong.  Lack of inventory is holding down sales.  Prices at the bottom are firm – prices at the top are still correcting.  Oakland reported we had three nice sales averaging $2 million for the week.  One of them was the property that we had marketed for a year and a half.  The buyer came to an open house (we had over 100 groups through) and bought it all cash for over $2 million dollars and a very quick close.  Everyone feels there is momentum in the market.  We had more open houses last weekend than previous weekends  and they are well attended
  • Monterey County—The steady beat of listings and escrows continues the Monterey Peninsula.  We are seeing sales in all price ranges, except the very top over $10 million and those are slow even in the best of times.  One third of our new escrows last week were for properties priced between $1.2 million and $1.9 million.  We see sales in that $1-2 million range really picking up of late. 
  • North Bay—San Rafael reported cash is king when it comes to winning the multiple offer game in the entry level market.  Nearby Southern Marin reported every deal requires heavy negotiating and seller concessions and last minute delays in removing loan contingencies.  Sebastopol noted open houses remain well attended. Every escrow has its own special demands, lender conditions, low appraisals, and Agents on the other side that won’t play nice.  Santa Rosa noted REO listings are starting to appear in increasing numbers. A noticeable increase in open escrows from $500,000-$900,000.
  • Peninsula—Burlingame noted that activity has picked up a lot, many buyers are getting involved in multiple offers and are beginning to understand that the market has changed and they need to step up to the plate when that perfect property comes along.  Half Moon Bay reported activity has picked up on the coast as seller’s are pricing their properties to sell within one or two weeks, along with the moving of some stagnate listings requiring many counter offers.  Menlo Park Santa Cruz Avenue reported two homes sold last week with multiple offers however neither went over the list price. Open houses were busy averaging 20-25 groups.  Palo Alto reported Inventory is slow to come on the market. Listings and sales are seasonally slow. Looking forward to a brisk after Labor Day market.  San Mateo reported there has been some more intense movement in the $1.2-1.5 range – Hooray!!!
  • San Francisco—The Lombard office reported a slow week except for the entry level and REO markets which remain hot, with multiple offers, including a surprising number of all cash. Major price reductions on the upper-end bringing mixed results. More hints of a listing surge post Labor Day.  The Market Street office reported lots of activity the last two weeks.  Back-up offers being elevated, properties that have been on the market for a while getting into contract, and buyers who want to get in to a home before prices go up and be assured of their $8,000first-time home buyer credit. There has been more activity than a normal August with fewer agents in the office taking time off.
  • Santa Cruz County—In last four months, the median price in the county has risen 23% or about $100,000 which is a very good sign.  Prices are still down about 14% from where they were a year ago at this time but it is definitely going in the right direction.  Inventory levels are down from a year ago with a 5.5 month supply of single family homes on the market as compared to 8.5 month supply in July/August of last year. Overall, there is improvement which is wonderful!
  • Silicon Valley—San Jose Almaden reported a hot low end market continues to fuel sales.  Highest sale last week was $550,000.  Two-thirds of the sales were under $300,000!  The Willow Glen office reported we are seeing a lot more multiple offers on our listings.  Saratoga reported our Previews (luxury end) market is still slow.  REOs and short sales still dominate the market; however there is a slow steady increase in our office’s average sales price. I think this is due to a much healthier market in the $750,000 to $2,000,000 range.
  • South County—Sale prices are exceeding list prices on sales under $400K due to lack of inventory.  On REO listings it is typical to have 5-10 multiple offers in that price range. Contingency time frames are usually shortened to strengthen the offer.  Short sale listings are increasing with back up offers in place.  Open houses are well attended and floor calls have been on the rise!  Morgan Hill reported the market remains unchanged for the past several weeks.  There is great demand for entry level homes–multiple offers happen and then there is just one successful buyer. 

Several offices are talking about a post Labor Day surge in new listings.  The Buyer appetite seems to be there, as long as the listings are priced right.  Typically August is the slowest of summer months with vacations taking priority, however this month has seen the best Buyer activity all year long for many offices.

 Please note that next week we’ll take a brief hiatus from Weekly Market Watch for the Labor Day weekend, but we will return the following week. 

Until then,

Make it a good one,

Rick 

Rick Turley

President, San Francisco Bay Area

Coldwell Banker Residential Brokerage

What Will the Road To Recovery Look Like?

Aug 16th, 2009
by Kathy Rain.
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A message from Rick Turley, President, San Francisco Bay Area Coldwell Banker Residential Brokerage

“I was driving home from an office meeting this week and listening to NPR.  Health Care and Town Hall meetings have been taking the spotlight lately, with the recession and the more recently upbeat Dow Jones moving down a few stories.  This in itself is somewhat a good sign.  During the drive, an interesting report came on which mentioned that the Federal Reserve, having just finished a two day meeting, was reporting the recession is ending. 

When I got home I decided to Google the news and I found this article on the NYTimes.com website:  http://www.nytimes.com/2009/08/13/business/economy/13fed.html?_r=2&partner=rss&emc=rss&src=igw.  The article reports, “Almost exactly two years after it embarked on what was the biggest financial rescue in American history, the Federal Reserve said on Wednesday that the recession is ending and that it would take a step back toward normal policy.”

The article goes on to note “Though the central bank stopped well short of declaring victory, policy makers issue their most upbeat assessment in more than a year by saying that the downturn appears to have hit bottom and that consumer spending, financial markets and inventory building by corporations all continued to stabilize.” 

I put a call into colleague Brendon Riordan of Princeton Capital to get his take on what those in the mortgage industry are seeing in relation to the current state of the economy.  Brendon had some comments that I tend to agree with.  He noted that “Many are concerned we’re going to have a ‘W’ shaped recovery versus a ‘V’ shaped recovery.  We don’t want to proclaim the recession is over, only to see the economy struggle for another year.  It’s going to be a long, slow recovery.  One month we may have positive economic news and the next, poor economic news.” 

Having said that, here is what we tend to be seeing about the market: 

  • It does appear that the worst of the recession may be behind us.
  • In all likelihood, the Fed is going to keep rates relatively low well into next year by continuing to purchase mortgage backed securities and keep the Federal Funds Rate close to zero.  It is currently at .25%.
  • In terms of conforming loan limits, as of right now, the higher conforming loan limits will end at the end of this year.  There is some legislation that is pending to renew the higher loan amount through November 2010 but as of right now, that is pending.  The same holds true for the first-time home buyer tax credit. We need to support this legislation.

Knowing this, what lies ahead?  Well I would say it’s positive to know that the worst may be behind us, but in all likelihood there are still challenges ahead.  There is still much recovery that needs to take place.  A broad-based “U” shaped recovery certainly is preferable over a “W”. Jobs need to continue to stabilize. There needs to be improvement in the secondary mortgage market in order to provide more choices and better pricing for jumbo loans.  Home sellers will need to be realistic about price, and buyers will need to be able to recognize a bargain when they see it and take action.  

Now let’s take a look at our local week in real estate: 

  • East Bay—Berkeley reports, “We are busy, busy, busy.”  Lots of buyers making lots of offers and multiple offers abound.  We received anywhere from 4-17 offers on various listings and competed against 2-15 offers on others from Berkeley to Richmond to El Sobrante to San Pablo. Danville reports we saw a real jump in new pending sales this past week.  More importantly, Blackhawk, which has been so quiet for so long, had nine new pending sales.  And in our office, four new sales this past week were over $1 million dollars!  Oakland reports a sudden sense of urgency among buyers.  We are doing a lot of approvals and submitting applications.  The buyers are out there looking.  Properties in foreclosures are coming into better neighborhoods, same for short sales.  Still it is August and sales have been a little slow the first week.  Seeing some nice listings come on the market.
  • Monterey County—August started out where July left off, with lots of Agent activity going on!   Pebble Beach and Carmel are bustling with people as the annual Concours d’Elegance comes to town , bringing it with it lots of people–some deciding they’d like a vacation home here!  Inventory is decreasing, partly due to sales going up and partly due to properties off market, being rented, etc.  Carmel is down to only about 14 months supply (was about 28 months), Pebble Beach is about the same, and Seaside, which has been the REO hot spot, has only 1.3 months’ supply!
  • North Bay—Greenbrae reports despite the late summertime, open houses were still well attended and buyers are out looking for bargains.  Many sellers are saying they want to wait until after Labor day to put their home on the market.  Buyers want more choices.  San Rafael reports REO inventory is increasing. We continue to see multiple offers in the entry level.  One home listed in Novato had 16 offers in the first week. It went into contract $50,000 over asking. All cash offers seem to be the winners of most of the bidding wars.  Petaluma reports multiple offers continue to be the norm in the under $300,000 range. We’re starting to see activity in the $500k-700k range with multiple offers on three properties in that price range. Cash continues to be king in the under $300,000 range. One property had 22 offers, the accepted offer was cash and was less than three of the highest offers.
  • Peninsula—Burlingame reports the wonderful weekend brought people out of the fog and into the peninsula. We are seeing more multiple offers as inventory is shrinking. The condo market is extremely slow.  Menlo Park Santa Cruz Avenue reported one offer was written and accepted from an open house guest! They do work!  Activity in a wide range of prices. Buyers that seem motivated to buy.  San Mateo reported these market wide stats:  Change 2009 VS 2008 same period – active – Belmont  N.C., Burlingame +23%, Foster City -15%, Hillsborough +41%, Redwood Shores +15%, San Mateo + 12%, PENDING – Belmont +23%, Burlingame +16%, Foster City +24%, Hillsborough +33%, Redwood Shores -125%, San Mateo +29%.  This reflects single family residential only. Higher ends are still a struggle as reflected in Burlingame and Hillsborough.
  • San Francisco—Lombard reports a good week for ratified offers in that it wasn’t entry – price level dominant. We had sales in the $1.2 & $3m ranges. Multiple counters, addendums and loan delays are the order of the day.  The Market Street office reported it has slowed a bit as many buyers are taking a couple of weeks off before the end of summer. Listings are being readied for the after Labor Day increase of inventory that we are anticipating. Open house attendance was great in some instances and disappointing in others.
  • Santa Cruz County—No major changes.  Inventory is status quo – low end continues to dominate sales.  There is a lot of activity below $800K and many times multiple offers.  With the low inventory we are seeing prices rising again, slowly. There is definitely a more positive outlook for both buyers and sellers.
  • Silicon Valley—Cupertino notes that the low-end is as competitive as ever.  San Jose Almaden reports that we’re seeing multiple offers on almost everything under $500K. Inventory remains low.  San Jose Main reports an excellent week for sales, mostly lower end and excellent open house activity.  Listings continue to be hard to get.  Many multiple offers on lower end properties.  Saratoga reports we experienced a slight increase in Previews activity with a few sales in the $2.5 mil to 3 mil range last week.
  • South County—Gilroy reports our local market continues to struggle with a lack of inventory in the lower end.  REO listings are down and multiple offers are the norm.  Hollister reports lower priced homes selling rapidly with multiple offers on many.  Morgan Hill reports the real estate industry seems to be getting positive signals, almost on a daily basis, that the housing market is out of “intensive care” and has entered the “recovery room.” Demand remains high, but more importantly, our Agents are reporting that the buying public deems to be much more optimistic about the economy in general and housing in particular. 

In terms of marketing activity, in general, and with exception of the entry level, most homes are on the market longer with discerning buyers waiting for the optimal home at the optimal price.  A well-priced, well-presented home can still fetch multiple offers, but it’s got to look appealing to the savvy buyers who are doing their homework.  There is no sense in overpricing a listing – a buyer won’t even give a home the time of day if they sense the seller is being unrealistic.  

At the same time, there seems to be no better time to snatch up bargains in the Bay Area at all price points.  In the higher end, we’ve seen cases of five to 10 percent list price reductions in properties that haven’t moved, and a final and acceptable offer coming in a little below that.  That’s not to say buyers should throw out ridiculous numbers.  Certain parts of the Bay Area, after all, have still held their value better than most of the entire country.  Sellers who don’t have to sell can hold firm, but there are others who cannot.  So, while it may take longer to get the buyer and seller to agree to terms, transactions are happening, and with open minds on both sides, we are beginning to see more positive movement for all. ”

“Until next week, 

Rick “

I noticed that the Coast statistics were not indicated in Rick’s update.  Check back tomorrow morning for a complete look at the Coastal Communities in the Monday Morning Market Update.